Young Sally Reynolds answers a want ad for a secretary, placed by Mr. Franz of Dolls, Inc. Upon meeting Franz, the mild-mannered owner and sole member of the company, Sally senses his deep attachment to the dolls he has created and grows uneasy, but when he implores her to accept the position, she agrees. Several weeks later, salesman Bob Westley arrives from St. Louis and notices Sally’s nervousness about Franz, but laughs when she confides that she believes Franz is too fond of his dolls. Over the next few days, Sally discovers that Franz’s previous secretary, Janet Hall, has gone missing, as has a neighborhood mailman. Bob stays in town over the next few weeks and visits Dolls, Inc. often to see Sally and work on a new line of dolls with Franz. Emil, a fellow puppeteer and old friend of Franz’s, arrives in town to put on a show. When Franz reveals he has been alone many years since his wife abandoned him, Emil becomes concerned, but Franz assures him he is content with his solitary work. One evening at a drive-in, Bob proposes to Sally, asking her to move back to St. Louis with him. When Sally hesitates about leaving Franz so abruptly, Bob promises to tell him, and Sally agrees to leave for Las Vegas the following day with Bob. The next morning, Sally anxiously awaits Bob, who does not come. Franz telephones Sally to ask why she is not at work and reveals that Bob stopped by to tell Franz he was returning to St. Louis. Stunned, Sally goes in to the office, then questions Franz about Bob’s departure. Franz admits Bob told him about his engagement to Sally, but suggests that Bob was not serious. Sally is startled when she finds Franz’s latest creation, a doll that looks exactly like Bob, but Franz insists he always designs dolls after people he knows. After Franz departs, Sally visits the police, but Sgt. Paterson is skeptical about Sally’s assertion that she believes that Franz is turning people into dolls. When Sally mentions that as well as Bob, Janet and the mailman have vanished, Paterson locates them on a missing persons list and agrees to question Franz. At the office, Franz readily shows Paterson the Bob doll and several identical others, and satisfied, the detective leaves. Franz then locks Sally into his back room and she faints. Upon reviving Sally sees a giant-sized Franz and realizes that the doll maker has reduced her to doll size. Franz revives Bob, who furiously demands an explanation. Franz explains that in his loneliness and complete fascination with dolls, he stumbled upon a means of transforming live beings into energy and then re-projecting them in reduced size. Franz demonstrates his reducing machine on Tommy, a stray cat, which he then presents to the frightened Sally. Franz insists he has harmed no one and provides the best of care for his “friends.” Franz then revives party girl Georgia Lane, teenagers Laurie and Stan and Marine Mac and demands that they entertain him. When Emil unexpectedly drops by, Franz leaves the miniature group alone. Bob chides the others for their complacent acceptance of their fate and insists they try to learn whether the reducing machine works in reverse. Mac offers himself as a test subject, and the men climb down the phone cord and make their way to the machine while Stan keeps watch, crawling up a rope to the door keyhole. Bob and Mac run out of time and just manage to get back to the table before Franz’s return. The next day Paterson stops by to question Franz again after learning that Bob has not been located in St. Louis. A young girl brings Franz her doll for repair, then delightedly notices Tommy, who has been hiding in a match box, and demands to keep the live toy. Determined to distract Paterson, Franz allows him into his workshop, then gives the girl a new doll and hides the miniaturized Tommy. Paterson asks about Franz’s strange machine in the back but refuses a demonstration offer. Later, Emil visits Franz to ask why the police have questioned him. Convinced that it is only a matter of time before his secret is discovered by the police, who will then take away his dolls, Franz decides to end his life and those of his miniaturized companions that night at Emil’s theater. Franz takes the group to the deserted theater and while Sally performs with Emil’s puppets for Franz, Bob puts a stolen sleeping pellet in Franz’s coffee. Outraged by Franz’s calm demeanor, Bob destroys Emil’s puppet and the commotion attracts the janitor. While Franz assures him all is well and drinks the coffee, the group escapes. Franz grows hysterical looking for them and corners most of them, but Bob and Sally escape and attempt to return to Dolls, Inc. After being chased by a rat, a cat and a dog, Bob and Sally find themselves by a delivery truck taking a package to Franz, and hide inside the box. At the office they find the workshop unlocked. Franz arrives shortly afterward to find Sally and Bob returned to normal size. Franz pleads with the couple not to abandon him, but they hurry away to report him to the police.